Sharp Decline and Recovery

Shares of SpaceX dipped below its debut price of $150 per share during early trading on Tuesday, marking the first time the valuation has fallen below that level since its initial public offering (IPO). The decline erased $600 billion in market value amid a broader tech sell-off. The drop followed a 16 percent slump on Monday, which had already removed $400 billion in value from the Elon Musk-led aerospace company.

Despite the recent losses, shares remain 10 percent above the $135 per share IPO price. SpaceX had seen record-breaking gains after its IPO on June 12, which propelled CEO Elon Musk to become the world’s first trillionaire. The company briefly surpassed Microsoft and Amazon in market value before falling to its most recent valuation of $1.9 billion.

Analysts Cautious but Optimistic

A Reuters analysis found that of the 50 most-valued IPOs in the last five years, investors would have been better off buying the S&P 500 index fund about three-quarters of the time rather than investing in a big IPO. However, some analysts are not overly concerned about the recent sell-off.

“I think any time you see a stock sell off sharply, especially one that everyone is focused on, and then bounce, it’s usually a setup for it to move higher. So I think we go higher from here,” Michael Monaghan, partner portfolio manager at FounderETFs, told Al Jazeera.

The sell-off comes as SpaceX secures new compute deals to support its AI ambitions. On Monday, the company reached a deal with AI startup Reflection AI, allowing it access to its Colossus 2 data center in exchange for $150 million per month. That follows a $920 million monthly deal with Google announced earlier in the month.

Monaghan noted that SpaceX’s revenue is increasing and its balance sheet is improving. “Their revenue is increasing, and their balance sheet is getting better, not worse. That should be good for the stock, not cause it to sell off,” he said. He also highlighted the stock’s premium valuation and low float, which spread market movements in both directions.

Broad Tech Sector Sell-Off

The slump for SpaceX is part of a broader sell-off in the tech sector. The tech-heavy Nasdaq Composite index dropped 1.4 percent in morning trading, erasing $680 billion in market value. Chipmakers, which have led market gains this year, were among the hardest-hit stocks.

Micron fell 9 percent in midday trading ahead of its earnings report scheduled for Wednesday after the market closes. Advanced Micro Devices dropped 5.7 percent, Intel fell 2.4 percent, and Nvidia dropped 2.8 percent. Other memory stocks, including SanDisk, also fell 9 percent.

Six of the seven “Magnificent Seven” companies — the biggest technology stocks on Wall Street — were under pressure as investor concerns about elevated AI spending grew. “It’s definitely jitters about AI. But is it a passing thing, or is it something more permanent? I don’t know that anybody can answer that just yet,” Aleksandar Tomic, associate dean for strategy, innovation, and technology at Boston College, told Al Jazeera.

These companies, commonly dubbed hyperscalers, have committed billions to expand their AI infrastructures, though clear evidence that AI products can generate returns justifying the spending remains elusive. “Is this just a temporary blip? I don’t think anybody can say with any real confidence right now,” Tomic added. “It could be a temporary passing phase, or it could mark the beginning of the deflation of the AI bubble that everyone has been talking about. It’s difficult to tell.”

The sell-off occurs amid expectations of tighter monetary policy under new US Federal Reserve Chair Kevin Warsh. The central bank signaled in its most recent policy forecast that it could raise interest rates at least once before the end of the year.